What are Replacement Capital Covenants?

Replacement Capital Covenants are financial agreements that a company enters into, often in connection with the issuance of preferred stock or trust securities. They typically require the issuer to maintain a certain level of "covered debt" outstanding. If the company redeems or repays this covered debt, it must issue new qualifying debt, or face certain restrictions or consequences, to ensure that the holders of the related preferred stock or trust securities remain protected.

Why is U.S. Bancorp changing its covered debt?

The filing indicates that the change is being made "in accordance with the terms of the Replacement Capital Covenants." This suggests that the original debt (7.50% Subordinated Debentures due 2026) is reaching maturity or is being addressed in a way that triggers the replacement provision within the existing covenants. The company is fulfilling its obligations under these older agreements by designating new subordinated notes as the covered debt.

What is the impact of this change on investors?

For investors holding the 7.50% Subordinated Debentures due 2026, this change signifies that these notes will no longer be subject to the specific requirements of the Replacement Capital Covenants after June 1, 2024. For investors holding the new 2.491% Fixed Rate Reset Subordinated Notes due 2036, these notes now serve as the "covered debt" under these covenants. For holders of the related preferred stock and trust securities, this action ensures that the covenant requirements are being met, potentially providing continued protection as intended by the original agreements.

Where can I find more details about these covenants?

The filing states that additional information regarding the terms of the Replacement Capital Covenants is summarized in U.S. Bancorp's Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 20, 2024. The actual Replacement Capital Covenants and related amendments are also filed as exhibits to this 8-K and incorporated by reference from previous filings.

US BANCORP \DE\ 8-K SEC Disclosure

Summary

U.S. Bancorp (USB) has filed a Current Report (8-K) on May 31, 2024, to announce a change in its "Replacement Capital Covenants." These covenants are financial agreements related to specific debt issuances. The primary change is that as of June 1, 2024, the company's 7.50% Subordinated Debentures due 2026 will no longer be considered "covered debt" under these covenants. Instead, the 2.491% Fixed Rate Reset Subordinated Notes due November 3, 2036, will become the new covered debt. This action is taken in accordance with the terms of the existing Replacement Capital Covenants, which are linked to preferred stock and trust securities issuances from 2006.

Key Highlights

1US BancORP is changing the "covered debt" under its Replacement Capital Covenants, effective June 1, 2024.
2The 7.50% Subordinated Debentures due 2026 will be replaced as covered debt.
3The 2.491% Fixed Rate Reset Subordinated Notes due November 3, 2036, will become the new covered debt.
4This change aligns with the terms of existing Replacement Capital Covenants established in 2006.
5The covenants are associated with specific preferred stock and trust securities issuances.
6The filing references previously filed 10-K and 8-K exhibits for detailed covenant terms.

US BANCORP \DE\ 8-K Report, Corporate Update (May 31, 2024)

Summary

Key Highlights

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